How Do Rehab Draws Work on a Fix and Flip Loan?

At closing, the loan documents establish the approved renovation budget and draw process. Purchase proceeds are applied according to the closing statement, while the approved rehab allocation remains controlled for project work.

Trato's Fix & Flip program includes draw schedule for rehab funds and can fund 95% LTC plus 100% of rehab, subject to 75% of after-repair value and underwriting. Those limits shape the overall loan, not an unrestricted payment of the full budget on closing day.

The final scope, budget categories, inspection requirements, eligible costs, and release conditions are stated in the approved documents.

See how draws fit the full program on our fix and flip loans page.

The draw cycle begins when the borrower completes an agreed portion of work and submits a request. Supporting records may include invoices, receipts, photos, lien documentation, and a breakdown tied to the approved scope.

An inspection verifies completed progress. The review compares the property with the requested items rather than advancing money only because a bill exists. Once eligible work is confirmed and conditions are met, the supported amount is released.

The cycle repeats through the project. Organized records and a clear construction schedule make each request easier to review.

Plan contractor payments with the reimbursement structure in mind. The borrower may need enough working liquidity to start labor and purchase materials before a draw is released.

Payment arrangements should match realistic stages of completion. Large deposits that are not supported by completed work may not align with draw eligibility. Discuss the draw structure with the contractor before closing so expectations are clear.

Reserves also matter when timing changes. Inspections, documentation corrections, or incomplete items can affect when a release occurs.

Changes should be raised before they materially alter the approved plan. A new layout, hidden damage, substituted materials, or expanded scope can affect budget, value, schedule, and draw eligibility.

The lender does not automatically increase the loan when project costs rise. The borrower is responsible for overruns and work outside the approved amount. Significant changes may require revised documentation or review.

Keep a running budget that separates committed cost, paid cost, completed work, draw reimbursement, and remaining contingency. That view helps identify pressure before the project runs short of cash.

A clean draw request ties every amount to completed, visible work and the approved budget. Use consistent line items, readable invoices, dated progress photos, and required lien records.

Do not wait until several unrelated stages are complete if the agreed schedule supports smaller requests. Regular communication helps the inspector and draw team understand sequencing and access.

Final requirements depend on the loan documents and project. Ask questions before ordering work that differs from the approved scope.

Confirm that the property is accessible for inspection and that completed work can be seen. A well-organized request reduces follow-up and gives the project team a shared record of remaining budget and progress.